Commodities Derivatives

Bilaterally traded OTC swaps and futures may be registered as pre-arranged trades through MEFF, and they will be immediately sent to the Clearing House BME Clearing.

Both these instruments are agreements between two parties to buy or sell a specific amount of electricity on a future date at a fixed price.

The difference between futures and swaps is the frequency of the variation margin.

• In swap contracts the variation margin is not settled daily although they have a periodical settlement.
• In futures contracts the variation margin is settled daily.

The Clearing House provides a mechanism guaranteeing the successful outcome of the trades to both counterparties. The Exchange specifies standard contract features to facilitate trading and Trade Registration.

There are three different types of trading strategies:

• Hedging: these contracts are a tool for managing price risk. Buyers and sellers can hedge spot market positions against adverse price movements, mitigating or eliminating market risk. Hedging entails taking a forward position that offsets an existing position and may be total or partial.
• Speculation: here the idea is to take on market risk in order to generate a profit by correctly betting on future price trends.
• Arbitrage: this strategy entails simultaneous trading in various instruments in order to leverage temporary price distorsion. MEFF's exchange traded contracts are very similar to the products traded OTC, fostering arbitrage opportunities.

The existence of market participants with differing trading interests in respect of these contracts bolsters market liquidity and efficiency.

Financial derivative contracts are accepted for Trade Registration, i.e. they are settled in cash.

The underlying asset is the delivery of notional electricity, during all the relevant hours depending on the type of product, on the Polo español del Mercado Ibérico de Energía (MIBEL):

• Base Load: Delivery of the underlying asset from the first hour of the day (0:00 to 00:59 hours) until the last hour of the day (23:00 to 23:59 hours) of all the days included in the delivery period. There will be one additional hour or one hour less for spring and autumn daylight saving time changes. It has a Flat Profile: all Relevant Hours compute the same.
• Peak Load: Delivery of the underlying asset from the ninth hour of the day (08:00:00 to 08:59:00 hours) until the twentieth hour of the day (19:00 to 19:59 hours) of every Monday, Tuesday, Wednesday, Thursday and Friday included in the delivery period.It has a Flat Profile: all Relevant Hours compute the same.

The unit of registration is 1MW or 100KW (0.1MW).

The nominal/multiplier of the contract is determined in MWh, using the following formula:

For contracts with unit of registration 1 MW:

For contracts with unit of registration 0.1 MW:

0.1 MW * No of contract days * No of product type relevant hours

For spring and autumn daylight saving time, there will be one additional hour (if day has 25 hours) or one hour less (if day has 23 hours).

The contract is priced in Euros per MWh, with two decimal places.

The registration period is between 08:00 and 19:00.

For each combination base/peak and term, a nominal or multiplier is associated, depending on the number of hours of the delivery period (for example: quarterly base 90 days with a 23 hour day, quarterly base 91 days with 24 hours, quarterly base 92 days with 24 hours, etc).

The number of hours depends on: the term of the contract, the calendar and the relevant hours of each contract. For example, for base and Mini contracts we have: 

Logically, contracts with the same delivery period (for example annual swaps and futures) have the same nominal.

The nominal for peak monthly, quarterly and annual contracts will depend on the number of days in the delivery period that are not Saturdays and Sundays.

The product coding follows the following scheme:

• The first two characters identify the type of derivative.

• The third character identifies the product type: base (B) or peak (P).

• The fourth character identifies the settlement type: by cash (C).

• Lastly, the delivery period and its detail is defined: Anual - CAL; Quarterly - Q; Monthly - M; Weekly - W or Daily - D.

Por defecto están abiertos los siguientes contratos:

• Hasta el día 14 del mes, todos los días del mes en curso y del mes siguiente. A partir del 15 de cada mes (o siguiente día laborable si el 15 es festivo), también todos los días del segundo mes siguiente.
• Los próximos cuatro contratos base de semana completa y fin de semana, así como los próximos dos contratos punta de semana hábil.
• Los próximos seis contratos mensuales base y punta.
• Los próximos ocho contratos trimestrales base y los próximos cuatro contratos trimestrales punta.
• Los próximos diez contratos base anuales.

A solicitud de los miembros, pueden abrirse a registro otros contratos cuyo periodo de entrega esté definido.

Backoffice information will be provided by BME Clearing. There are two ways in which backoffice reports may be obtained: from the Settlement Website and from the MEFFSTATION.

MEFFPower offers its Members a web portal with vast information on the activity of the clearing house, and in particular details on member activity, deals crossed, open interest, settlements, margins etc.

Access to this portal is with user ID and password which will be provided by BME Clearing. Should you not have this data yet or should you want an additional User ID, please contact BME Clearing´s helpdesk on +34 91 709 5851 or clearinghelpdesk@grupobme.es

This service is offered free of charge and it is only available for MEFFPower members in order to check on their operating data and statistics. Results appear in tables and data may be ordered, filtered, grouped, hidden, arranged etc. The purpose being that entities may personalize the reports generated on their screens, which may also be exportable into different formats (txt, excel or pdf amongst other). Once the initial set-up is changed, it will remain as per the last set-up.

From the MEFFSTATION main menu, using the configuration option, automatic file download at the end of a session can be enabled. Members can configure the files they wish to download and the folder where they want to store them.

Members can force transfer files to be generated from the "actions" option of the main menu at any time during the session. Information about the files available at the start of the session or during the day is provided. Information about settlements and margins is only available at the end of a session.

In the case of remote access, the transfer files are already configured so that they are generated automatically at the end of the session. To see and copy these files once they have been generated, click the desktop icon “Shortcut to TRASPASO”.

If the transfer files are required during the session they can be generated from the actions of the main menu and be downloaded in “Shortcut to TRASPASO”.

If a member has a problem downloading them, the transfer files can be requested to the Market Services Department.

The description of the energy sector clearing transfer files is available in the document MEFFStation Clearing raw data files.